Xerium, Kerr-McGee begin trading in low-par area; 24 Hour Fitness sets price talk on $700 million deal

By Sara Rosenberg

New York, May 17 - Xerium Technologies Inc. and Kerr-McGee Corp. allocated their credit facilities Tuesday, with Xerium's U.S. term loan B and Kerr-McGee's term loan B and term loan X seeing trading activity in the low-par context.

In the primary, 24 Hour Fitness Worldwide Inc. set price talk on its $700 million credit facility as the deal launched via a bank meeting Tuesday.

Xerium's $339.3 million U.S. term loan B opened for trading around par bid, par ½ offered on Tuesday and remained in that region throughout the session, according to market sources.

The tranche, which was upsized from $330 million during syndication, is priced with an interest rate of Libor plus 200 basis points. Originally, the term loan was launched with price talk of Libor plus 225 basis points, but pricing came down during syndication on strong demand.

Xerium's $750 million senior secured credit facility (B1/BB-) also contains a $249.3 million dollar equivalent euro term loan B, a $61.3 million U.S.-equivalent Canadian term loan B, a $50 million 61/2-year revolver and a $50 million 364-day revolver, with all four of these tranches priced with an interest rate of Libor plus 225 basis points. The revolvers have an unused fee of 75 basis points.

The euro term loan B was downsized from an original dollar-equivalent size of $264 million, and the Canadian term loan B was upsized from an approximately original U.S.-equivalent size of $56 million at the same time as the U.S. term loan B upsizing.

Citigroup Global Markets Inc. and CIBC are joint lead arrangers and joint bookrunners on the credit facility, with Citigroup the left lead and the administrative agent.

The company is getting the new credit facility in connection with its initial public offering of approximately 13.399 million shares of common stock, which priced at $12.00 per share on Tuesday and is scheduled to settle on Thursday.

Proceeds from the credit facility and the IPO will be used to refinance existing debt.

Xerium is a Westborough, Mass., supplier of consumables used in the manufacture of paper.

Kerr-McGee starts trading

Kerr-McGee's $2.25 billion senior secured six-year term loan B was seen actively trading steadily in the par bid, par 3/8 context after the break on Tuesday, while the $2 billion senior secured two-year term loan X was seen quoted slightly wider at 99 7/8 bid, and anywhere from par 3/8 to par ½ offered during market hours, according to traders.

"I think it's been trading around par, par 1/4," one trader added regarding the term loan B.

The term loan B, which was upsized by $250 million during syndication, is priced with an interest rate of Libor plus 250 basis points and contains a step down to Libor plus 225 basis points under the conditions that the company repay its term loan X and leverage is below 2x. At launch, the term loan B was talked at Libor plus 200 basis points, and then price talk headed up to the Libor plus 225 basis points to 250 basis points range during syndication.

The term loan X is priced with an interest rate of Libor plus 225 basis points, flexed up from original price talk of Libor plus 175 basis points during syndication as well.

Kerr-McGee's $5.5 billion senior secured credit facility also contains a $1.25 billion senior secured five-year revolver, which was also upsized by $250 million during syndication, with an interest rate of Libor plus 225 basis points that contains a step down to Libor plus 200 basis points under the condition that the company repay its term loan X within nine months. After nine months, regardless of whether the term loan X was repaid or not, revolver pricing will be determined by a leverage-based grid. At launch, the revolver was talked at Libor plus 175 basis points.

By increasing the total size of its credit facility by $500 million, combined with the fact that the company had over-funded by $500 million, Kerr-McGee eliminated its need for the $1 billion unsecured bridge loan that was originally part of the financing package. The bridge loan was intended to be taken out with a bond offering.

Security for the credit facility is basically a perfected first priority interest in all tangible and intangible U.S. assets and all of the capital stock of direct and indirect subsidiaries.

Proceeds will be used to refinance debt, finance a $4 billion modified Dutch auction self tender offer for shares of the company's common stock and for general corporate purposes.

As a result of the company's self tender offer and financing needs, all three ratings agencies downgraded Kerr-McGee's secured debt ratings - Moody's Investors Service to Ba3, Standard & Poor's to BB+ and Fitch Ratings to BB.

Under the tender offer, the company will buy back up to $4 billion of its common stock, at a price not less than $85.00 per share or more than $92.00 per share. The tender offer is expected to begin around April 18.

Following the tender, the company expects to reduce debt by $3.5 billion to $4.5 billion over a two-year period with net proceeds from the separation of its chemical business and divestiture of certain oil and gas properties, along with cash flow from operations, which has been underpinned by an expanded hedging program for 2005 through 2007.

JPMorgan and Lehman Brothers are the lead banks on the credit facility, with JPMorgan the left lead.

Kerr-McGee is an Oklahoma City-based energy and inorganic chemical company.

24 Hour Fitness price talk

Price talk surfaced on 24 Hour Fitness Worldwide Inc.'s proposed $700 million senior secured credit facility in conjunction with the deal's launch, with both the $600 million seven-year term loan B and $100 million six-year revolver talked at Libor plus 250 basis points, according to a market source.

JPMorgan and Merrill Lynch are joint lead arrangers on the deal, with JPMorgan on the left.

The deal is thought to have the potential to see a lot of rollover commitments as the new credit facility is essentially only adding about $200 million of incremental term loan bank debt when compared to the existing credit facility.

The syndicate on the facility already held a pre-launch meeting last Tuesday to give a select group of potential investors an early look at the deal. The company did not attend last week's meeting but did attend Tuesday's retail meeting.

Proceeds from the credit facility will be used to help fund the leveraged buyout of 24 Hour Fitness by Forstmann Little & Co.

In addition to the new loan, Forstmann plans to finance the approximately $1.6 billion transaction with more than $900 million from its equity and subordinated debt funds.

The transaction, which is expected to close in June, is subject to regulatory approval. It is not subject to financing.

24 Hour Fitness is a San Ramon, Calif., fitness center company.

VCA Antech closes

VCA Antech Inc. closed on its new $500 million credit facility (Ba3/BB-) consisting of a $475 million term loan and a $75 million revolver, with both tranches priced at Libor plus 150 basis points.

Goldman Sachs and Wells Fargo were the lead banks on the deal, with Goldman the left lead.

Proceeds are being used to retire the outstanding debt under the company's existing facility and to fund the purchase of its outstanding 9.875% senior subordinated notes.

"I am pleased that as a result of our strong operating performance and the outstanding efforts of Goldman Sachs and Wells Fargo, we were able to lower the interest rate on our senior term notes by 25 basis points, consolidate a majority of our debt obligations under one debt agreement and retire our 9.875% senior subordinated notes," said Bob Antin, chairman and chief executive officer, in a company news release.

VCA Antech is a Los Angeles-based provider of pet health care services.

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